Ansoff’s Matrix
The report is prepared to demonstrate about the acquisition of Whole Foods Market by Amazon .com and thus it will illustrate about the main strategies implemented by the company to forecast and evaluate the suitability. While Amazon.com is a multinational technology organization that has focused on the e-commerce platform and cloud computing technology to deliver products and services to the people worldwide, Whole Foods Market is the supermarket chain that has been acquired by Amazon and it is known for its delivery of organic products (Phillips and Zhdanov 2013). Jeff Bezos is the owner of the organization and it is one of the second largest private employers at present in US with over 550,000.
The ANSOFF matrix clearly shows that the first and foremost reason for acquiring Whole Foods Market is to improve its efficiency in managing market penetration and at the same time, allow for diversification, development of new products and services along with the growth and development of market to increase the customer base. The super market chain of more than 450 retail stores were purchased by Amazon, which was basically to attract the investors and this eventually resulted in the addition of 11 centers for food storage along with nearly 500 centers for distribution of the products and services by Amazon (Amazon.com 2019). This has been a great approach for business expansion and at the same time, become a large retail chain to increase the range of products to artificial flavors, colors, sweeteners, preservatives, hydrogenated fats that are USDA Certified. Amazon has anticipated growth in its shares from Whole Foods customer base, which has allowed evolvement and transition in all operational aspects for the fulfillment of customers’ needs and preferences (Kansal and Chandani 2014).
Sustainability of Whole Foods market
The products and services delivered by Whole Foods Market are quite sustainable and are considered as of great quality that has been certified by the USDA as well. The rating system shown below represents good growth in terms of quality and consistency in delivering according to the needs and expectations of the clients. With the acquisition, Amazon.com has managed to increase its wide variety of products as well as made sure to overlap the existing customer base, without needing to remove them as they can get everything under the same roof. Amazon.com has expanded into a new category from a position of strength and this has resulted in capturing new market share along with influence in negotiations with the vendors by pushing the competitors’ profit margin down. The prices are kept lower for the products offered by Whole Foods Market without compromising on the quality of those, which has further helped in achieving operational efficiency and accomplishment of consumers’ demands and expectations with ease (Park, Yoon and Kim 2013). The products and services of Whole Foods Market are available online with the acquisition, which is a sustainable approach to expand market share and surpass other retailers within the competitive business environment (Amazon.com 2019).
Company’s Key product and services.
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Pestle |
Data (Facts) |
Analysis (implications) |
Application |
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Political |
The rules and regulations on organic products and GMO food items could create new opportunities for the acquisition to be successful. |
The free trade agreement s and lower labour standards further created more scopes to open overseas and enter new markets easily |
Application of labour standards and to enter new markets |
|
Economic |
The higher employment rate in US allowed the acquisition of Amazon and Whole Foods Market to create new employment opportunities for people (Chang, Chang and Wang 2014) |
This could also affect the supply chain by increasing its supplies’ costs; furthermore make the acquisition to sell products and services at increased prices. |
From the economic perspective, the rising labour standards could create some issues and threats, because of the dependence of supply chain on the developing nations’ producers. |
|
Social |
The healthy lifestyle choices and cultural diversity have also made the acquisition of Amazon and Whole Foods Market to open up ways of influencing co consumer buying behaviours. |
The companies have gained scopes to deliver diverse product mix for fulfilling the cultural diversity needs, furthermore maintain steady growth in spite of the increased wealth gap. |
Adopting culture and applying product mix strategy to improve social wellbeing |
|
Technological |
The automated business processes and patenting the GMOs improved the business performance, which further made the acquisition of Amazon and Whole Foods Market successful by providing enhanced online services through usage of mobile smart phones. |
The customers could now access adequate supply of products and at the same time, gain wider access to both the products delivered by Amazon.com and Whole Foods Market. |
Application in workplace for improved business performance (Claro et al. 2013) |
|
Environmental |
The higher rate of pollution and global warming could threaten the ecosystem and as such, affect the productivity of farmers in fields. |
With the acquisition of Amazon and Whole Foods Market, new initiatives and environmental approaches are undertaken to manage waste disposal and sustainability. |
The application environmental laws and rules could help to preserve the ecological balance in nature as well as deliver eco-friendly products and services for ensuring higher level of customer satisfaction. |
|
Legal |
The Environment protection laws, rules and guidelines and labor laws have allowed both these companies to evaluate their suppliers according to fair labor practices. |
The suppliers are provided with good amount of money and the investors have been drawn to capitalize on the Whole Trade Guarantee and the brand image and reputation have improved since then (Gustafson et al. 2013). |
To maintain proper values and ethics |
|
Force |
Description |
Result |
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Rivalry |
The competition is high with the presence of Tesco, Walmart, etc. |
With the acquisition of Whole Foods Market, Amazon has gained a sustainable competitive position among the other retail supermarket chains. |
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Competition = Bargaining power of consumer |
The buyer power is moderate, because Amazon already held a sustainable position |
With the acquisition of Whole Foods Market, it has become easy for influencing the buying behaviors of consumers, which has made customers remain inclined towards the company without shifting to other producers of organic produces (Ahi and Searcy 2013). |
|
Supplier |
The supplier power is high because the production of goods and services is dependent upon the capacity of suppliers of the organic produces (Conlon and Mortimer 2013). |
The suppliers supplying raw materials and resources are also responsible for making any changes to price of products and services after the acquisition of Whole Foods and Amazon. |
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New Entrant |
The threat of new entrants is high, because with the emergence of many retailers, there have been constant introduction of new products and services |
This could hinder management of opportunities to compete within the business environment |
|
Substitution |
The company standards are maintained, which has helped in marketing the products effectively |
this has helped in avoiding the threats of substitute products made available in the marketplace and the threat is low (Göbel et al. 2015) |
The primary activities include inbound logistics, operations managed through acquisition of Whole Foods, outbound logistics and management of marketing, sales and post sales services. The support activities include maintaining a proper infrastructure, management of human resources, development of technology and managing procurement. The skilled and knowledgeable employees within the workplace have gone through training and developmental sessions, which has helped in making investments on huge amounts of resources and thus created higher level of motivation too (Gereffi and Fernandez-Stark 2016).
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Strengths · With the acquisition of Whole Foods Market by Amazon.com, the distribution network has become strong and this has helped in expanding distribution centers to reach up to high potential markets · Highly skilled and knowledgeable workforce · The strong brand portfolio and good suppliers’ connections (Tyson and Walske 2016) · Good marketing strategies through advertisements and promotional campaigns after acquisition |
Weaknesses · Even after the acquisition of Amazon and Whole Foods market, the level of innovation is poor compared to other players within the industry · The ration of profitability and Net Contribution percentage after acquisition of Amazon and Whole Foods Acquisition are also quite low and are below the industry average standards · Due to the increased numbers of inventories, the need for raising more capital is essential, which was a daunting task for gaining long term growth (Grönman et al. 2013) · The new entrants in the market have been difficult to cope up with · The financial planning was not done right, which further contributed to the challenges in getting enough finances |
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Opportunities · The increase in expenditures by clients has increased the economic condition · The green drive initiatives by Government created scopes for lessening environmental degradation · The advanced technologies allowed the acquisition to introduce new pricing strategies and keep the products within reasonable prices (Ciravegna and Brenes 2016) · The new environmental policies further could allow for using home advantage in new technology and gain higher market share within the new category of products and services |
Threats · Threats of new entrants in the market and competitors · The rise in level of pay could pressurize the profit level for Amazon and Whole Foods acquisition · The currency fluctuations could be major threats as well · The increased numbers of local distributors could also pose serious threats for reducing the profit margin for Amazon and Whole Food Market (Simons 2017) |
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Opportunities (external, positive) |
Threats (external, negative) |
|
|
Strengths (internal, positive) Example |
Strength-Opportunity strategies Strong brand name and image has allowed for acquisition of Whole Foods to increase products’ range and customer base too. This has also helped in entering Asian markets and spread the products all over the world for managing global business expansion (Grewal et al. 2017). |
Strengths-Threats strategies The good working capital and financial status could allow for creating new stores and divert the mindsets of clients from the other companies to Amazon Whole Foods merger (Holt 2016) |
|
Weaknesses (internal, negative) |
Weakness-Opportunities strategies The customers are informed about the merger and acquisition and the new products and services that should be delivered, which could influence their buying behaviors |
Weakness-Threats strategies As it would create scopes for a new merger to be successful, educational opportunities should be provided for making the employees of both companies strive towards proper business functioning (Scrinis 2016). |
The feasibility demonstrates whether the strategy in practice is effective for managing the acquisition of Amazon and Whole foods Market and even checking whether the financial resources are placed properly or not, which could help in raising enough funds, furthermore manage human resources properly along with various skills required to achieve the business goals and objectives easily. The strategic capabilities are essential for creating a great positive impact on the long term growth and survival along with achievement of competitive edge over its competitors for Amazon (Fischer, Pirog and Hamm 2015).
Physical
The physical resources mainly include the manufacturing and production equipment and machineries, inventories, assembly, storage facilities and distribution facilities that are necessary for ensuring that that production is successful. The physical capabilities and resources include digital merchandises, patents, and databases holding customer related data and information, warehouses, technology infrastructures that contribute to the operational aspects to ensure long term success and gaining competitive advantage in business as well (Matson and Thayer 2016).
Intellectual
After acquiring Whole Foods Market, Amazon has focused on protecting the intellectual property rights and made sure to undertake any preventive measures for selling the products and services in a responsible manner. The intellectual properties are registered properly, which has been the best interest to copyright and this has helped in preserving the brand logo and patents too. Investing enough time further helped in protecting the photos, descriptions and made the products and services hot selling items, which also prevented infringement of intellectual property rights too (Basha et al. 2015).
Human
The Employee empowerment programmes have helped in keeping the staffs encouraged and motivated, furthermore allowed them to innovate and gain good skills, knowledge and experience, furthermore ensure management of key competences in respect of the management of human resources (Casini et al. 2015). The Career Choices initiative after the acquisition of Amazon and Whole Foods Market has allowed paying the employees to take course in the demand fields while the Pay to Quit enabled provided the associates with money for quitting from their jobs and create more opportunities of employment to become successful in the future career. The facilities of Amazon along with the human resources have helped in the development of a flexible supply chain that could give the clients with benefits regarding additional discounts and offers provided to the products and services (Asioli et al. 2017). This has also enhanced the capability of Amazon to negotiate with the third parties, furthermore combined the human resources and competencies that have played major roles in ensuring long term growth, success and prosperity by providing a good strategic direction to the company as well.
Sustainability of Whole Foods
Finance
The financial resources attained after the acquisition of Amazon and Whole Foods Market include the working capital along with the company assets and liabilities that are currently possessed. Considering the balance sheet and income statement, it has been understood that short term investments and cash equivalents as well as the management of inventories could also help in managing enough financial resources required to maintain a proper budget structure all throughout (Vukasovi? 2016). After the acquisition, there is abundant cash and other assets that are required to cover the liabilities and at the same time, strengthen its financial status and improve working capital to survive in the competitive business environment.
The level of acceptance of Amazon and Whole foods is quite high among the clients, because though the changes have affected the consumer facing front end, still the lowering down of prices of products and introduction of newer technologies have facilitated other services such as one day delivery and grocery pickup as well. Most of the clients agreed that the lowering of prices did not affect the quality of products, which has allowed the company acquiring Whole Foods to set up a strong brand image and new prime benefits were introduced too (Aschemann-Witzel et al. 2017). This included delivering healthy food items made available at reduced cost and easy accessibility due to increase in distribution channels. The acceptability of acquisition of Amazon and Whole Foods Market by stakeholders in great, especially for the customers, investors or shareholders and employees.
The investors or shareholders approved the merger with Amazon though with the management of various transactions that were subjected to regulatory approvals and customary conditions of closure. Though there were speculations that the investors, shareholders and analysts were worried about the deal of acquisition because this might result in overturning the condition of grocery shops, services associated with food delivery and meal kit companies. The offer made by Amazon showed a 27 percent premium on the price of Whole Foods stock and questions were raised by investors regarding whether it might be too cheap or not (Alrøe et al. 2017). With the aim of trading at $57 per share, the shareholders felt it convenient and agreed to the acquisition of Amazon and Whole Foods Market. The market cap for Amazon also increased by an entire amount that was already paid for the acquisition and this influenced the shareholders and investors to understand that the acquisition has created more rooms for improvements and to pay higher amounts of money for the strategic assets (Claro et al. 2013). Previously, Whole Foods was facing issues like loss of share and the organic food space became more competitive, due to which, the shareholders demanded the company to make major changes but with the acquisition, the shareholders were not only benefited, but also got various scopes and opportunities to gain good amount of return on investments (Amazon.com 2019).
Pestle Analysis
With the merger, the employees have gained various new scopes and opportunities to grow and excel in their career, furthermore ensured achievement of synergy, which is essential for the formation of a good corporate culture and good working conditions too. The level of acceptability among the employees is considerably lower, because with the merger and acquisition, there have been issues like inability to adopt the new culture of another company and to get accustomed with the working conditions of Whole Foods market. It is important for Amazon to make sure that the acquisition creates good employment good opportunities and thus necessary training and developmental programs were ranged for them to strengthen their skills, knowledge and expertise (Conlon and Mortimer 2013). The customers have accepted this acquisition whole heartedly because with the acquisition, there has been a new and wide range of products and services available. The products and services of both the companies namely Amazon and Whole Foods Market are made available, which has influenced the buying behaviors of consumers and created convenience to access the products and services, all under the same roof with much ease and effectiveness (Amazon.com 2019).
Prior to Whole Foods Market acquisition by Amazon, the company had experienced annual revenue of nearly $16 billion, however, with the acquisition, new stores are opened with both Amazon and Whole Foods’ products available at the same place. The customer are influenced and motivated to try the new way of business accessibility, which has made them able to purchase Amazon items at Whole Foods stores and pick up their specific products and services in Amazon Lockers. The rationale though has been the difficult of adopting the culture of another organization, which could affect business practices and slow down the business operations. Based on the evaluation, it could be understood that there are various environmental concerns, capabilities of the organization along with the expectations of the organization after the acquisition is done (Gereffi and Fernandez-Stark 2016). The mixture of two cultures of Amazon and Whole Foods Market has helped in utilizing data and information for managing the product mix components along with the enforcement of strict employee policies, laws and guidelines for saving up a lot of cost and pass the products and services to the clients appropriately (Amazon.com 2019).
With the mixing up of two cultures, it has become easier for Whole Foods Market to possess a highly empowerment type of culture, which has set standards and resulted in introducing new inventory management systems for managing stocks and at the same time, increased the sales margin that was below the expected level for Whole Foods Market in the past few years. This has enhanced the business’ capabilities and allowed the merger and acquisition to cater to the demands and expectations of the customers with much ease and effectiveness. Amazon has always prioritized on the lowering down of costs and managing business efficiency with focus on performance measurement in the warehousing and distribution centers. Amazon.com has focused on enhancing its online grocery services though the growth has been slower, because of which, the company has been trying to transform the Prime consumers to Fresh (Ahi and Searcy 2013). With the acquisition of Whole Foods, the trust issues with the consumers had been settled and t has also improved the online purchases made by the customers online. This has been one of the strengths of the acquisition, which has allowed the customers to gain access to high quality fresh food items and at the same time get the products of Whole Foods Market at a reasonable price.
Five Forces
With the environmental concerns been one of the major focus on businesses nowadays, there has been focus on reducing the carbon emissions and keeping the environment clean and healthy as well. Often, it has been seen that the online shopping has made it easier to remain environment friendly and at the same time, allowed the acquisition parties to deliver fresh quality products and services under the same roof at a much reasonable price too (Shankar et al. 2016). With the acquisition of Whole Foods, Amazon has managed sustainable and eco-friendly packaging and made sure to resolve the issues related to sustainability along with standard shipping towards greener approach and maintaining a healthy environment too (Amazon.com 2019).
The Amazon-Whole Foods merger expectations include increase in sales revenue in the upcoming years and to ensure best practices for benefiting the stakeholders and at the same time, facilitate innovation from every aspects to drive more customers towards the organization. Few major changes were implemented and should be implemented in the future as well to make sure that more items and services are added within the range of products offered currently, which should create a huge customer base and keep clients inclined towards the company effectively (Simeone, Scarpato and Marinelli 2016).
With the acquisition the transportation has resulted in higher emissions of carbon dioxide and other harmful gases, which has degraded the environment and created imbalance in nature.
The delivery of products and services into the neighborhood were never designed for management of freight traffic, which further contributed to congestion, noise related issues and damage of infrastructure.
Though the expectations of clients are met at a certain extent, still there are few cases where the customers have felt that the acquisition has just resulted in enhancing the wide range of products rather than focusing on the quality standards. Due to this, consumers have been less motivated to make purchases online, which has reduced the profit margin and hindered attaining competitive advantage (Shankar et al. 2016).
- It is recommended to adopt greener approaches and manage environment friendly packaging and production of eco-friendly products and services for maintaining an ecological balance in nature
- The proper management of stocks and inventories is recommended for ensuring that the right prices are set for the products and services
- The extension of online grocery items and managing transparency would result in increasing the product range such as the artificial colors, flavors, sweeteners, preservatives, etc. for influencing the choices and buying decisions made by the customers
- Adopting the culture and working conditions of Whole Foods after the acquisition should be essential as well for making roe products available in the shelves and at the newly opened stores
- It is also recommended to provide the right training and development programs to employees for improving their skills, knowledge and expertise and ensure that the Amazon Whole Foods merger is successful and noteworthy in the future as well
Conclusion
The report was prepared to demonstrate about the management of business considered Amazon’s acquisition of Whole Foods Market to sustain in the competitive marketplace. The strategies implemented include the PESTLE, value chain and the five forces that helped in determining the various factors that might affect the business functioning. The feasibility Amazon provided a brief understanding about how the physical, intellectual, human and financial resources were responsible for checking whether the Amazon Whole Foods merger could be successful or not. The level of acceptance by the stakeholders is quite high and it showed that the merger had brought changes in structure of the organization and enabled enhancing the range of products and services to influence consumer buying behaviors to the utmost level possible.
Value Chain
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